RE Royalties: Shareholder Value Put Into Practice

An opinion piece by Carsten Mainitz (Apaton Finance GmbH).

The Canadian company has pioneered the introduction of the royalty model—familiar from various industries—into the world of renewable energy. The company grants loans and, in return, receives revenue-based royalties from private and publicly traded companies in the form of a share of revenue. Founded in 2016, the diversified portfolio comprises more than 120 active royalties for projects across solar, wind, hydro, battery storage, energy efficiency, and renewable natural gas in North America, South America, and Asia.

This gives shareholders access to a broadly diversified portfolio spanning various green energy sectors and geographically dispersed across multiple regions. In addition, the company pursues an attractive dividend policy. In recent years, investors have received an annual dividend of CAD 0.04, corresponding to a yield of over 10%.

Even though the shares have already risen by 50% this year to CAD 0.355, the market capitalization of CAD 15 million remains very modest. Given the attractive business model, proven growth, and significant potential, management considers the valuation clearly too low. Against this backdrop, the company initiated a strategic review in the spring to explore opportunities to increase enterprise value. Various options are being evaluated, including a potential sale of the company and measures to optimize the capital structure through equity or debt financing. The process is open-ended and is being supported by PwC CF in the role of strategic partner. With the announced review, the company aims to ensure it is strategically well-positioned for the next phase of growth. According to the company, the project pipeline is well-stocked with approximately CAD 20 million in binding letters of intent, as well as an additional CAD 200 million in projects under active review.

COO Peter Leighton explained RE Royalties' strategy at the 19th International Investment Forum.

Read the full article and watch Peter Leighton, COO at the 19th International Investment Forum here.